Test your basic knowledge |

AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






2. Entry (or exit) of firms does not shift the cost curves of firms in the industry






3. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






4. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






5. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






6. ATC = TC/Q = AFC + AVC






7. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






8. The total quantity - or total output of a good produced at each quantity of labor employed






9. The most desirable alternative given up as the result of a decision






10. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






11. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






12. The output where ATC is minimized and economic profit is zero






13. MUx / Px = MUy/Py or MUx/MUy = Px/Py






14. Costs that change with the level of output. If output is zero - so are TVCs.






15. The change in quantity demanded resulting from a change in the price of one good relative to other goods






16. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






17. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






18. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






19. The mechanism for combining production resources - with existing technology - into finished goods and services






20. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






21. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






22. Ed = (%dQd)/(%dP). Ignore negative sign






23. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






24. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






25. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






26. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






27. When firms focus their resources on production of goods for which they have comparative advantage






28. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






29. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






30. The marginal utility from consumption of more and more of that item falls over time






31. The practice of selling essentially the same good to different groups of consumers at different prices






32. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






33. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






34. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






35. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






36. A good for which higher income increases demand






37. Ei > 1






38. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






39. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






40. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






41. The price of a good measured in units of currency






42. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






43. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






44. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






45. The rational decision maker chooses an action if MB = MC






46. All firms maximize profit by producing where MR = MC






47. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






48. The additional cost incurred from the consumption of the next unit of a good or a service






49. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






50. Exists if a producer can produce more of a good than all other producers